A contractor working through their own limited company can pay themselves through a couple of ways such as paying a salary and paying dividends. There are a few factors that need to be considered when deciding the best way to go about this.
For example, when operating inside IR35, contractors will be restricted to paying themselves a salary however when operating outside IR35 the doors are opened to maximise tax efficiencies.
A contractor working through their own limited company can pay themselves by drawing dividends and a salary.
There are a few factors that need to be considered when deciding the best way to go about this. For example, if your contract is deemed to fall inside IR35, you will be restricted to paying yourself a salary.
On the other hand, if your contract falls outside of IR35, you'll then have the option of drawing a salary and dividends to maximise tax efficiency.
If you're contracting through an umbrella company, you'll receive a salary from your provider (similar to how you'll be paid if you were a permanent employee).
Additional resources:
We explain which contractor segment you might fall into. We walk through IR35 and the implications for you and how you may fall inside or outside of IR35.
- What is a contractor
- Types of contractors
- Contractor business structures
- Contractor accounting
- Understanding IR35
- Contractor insurance
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